SHIV ASREY SINGH,KANPUR V. DY.CIT-2, KANPUR

ITA 579/LKW/2024

AI Insights

The case involves Shiv Asrey Singh, the appellant, who contested the reassessment of his income for the Assessment Year 2012-13 by the Income Tax Department. The reassessment was based on the Department's claim that Singh had engaged in transactions with M/s Jai Maa Kali Enterprises involving penny stocks, which were used to introduce unaccounted money into his books. The Assessing Officer (AO) added Rs.26,95,654 as income from these transactions and an additional Rs.67,391 as commission, totaling Rs.27,63,045. The First Appellate Authority upheld this decision, leading Singh to appeal to the Tribunal. The Tribunal found that the transactions were recorded in the previous assessment year and thus should not have been taxed in 2012-13, leading to the deletion of the addition to Singh's income.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 705963 (ITAT-LUCKNOW)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Assessment Year: 2012-2013
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANJEEV KRISHNA SHARMA
• Assessee Lawyers: RAKESH GARG
• Keywords: Set aside; Reassessment proceedings; Capital Gains; Accommodation entries; Reason to believe; Bogus
• Section: 147; 148; 143(3); 271(1)(c); 133(6)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, LUCKNOW BEFORE SHRI. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA No.579/LKW/2024 Assessment Year: 2012-13 Shiv Asrey Singh SB-17, SBI Colony Ratanlal Nagar Kanpur v. The DCIT-2 Kanpur TAN/PAN:AIZPS6999M (Appellant) (Respondent) Appellant by: Shri Rakesh Garg, Advocate Respondent by: Shri Sanjeev Krishna Sharma, D.R. O R D E R This appeal has been preferred by the Assessee against the order dated 30.07.2024, passed by the ld. Commissioner of Income Tax (Appeal), National Faceless Appeal Centre (NFAC), Delhi for Assessment Year 2012-13. 2.0 The brief facts of the case are that the assessee e-filed his return of income for the year under consideration on 27.09.2012, declaring a total income of Rs.20,53,620/-. Subsequently, the assessee’as case was reopened under section 148 of the Income Tax Act, 1961 (hereinafter called “the Act’) as Department was in possession of information that the assessee had entered into transaction with M/s Jai Maa Kali Enterprises for sale/purchase of shares during the year under consideration ITA No.579/LKW/2024 Page 2 of 10 and earned a profit of Rs.26,95,654/-. The Assessing Officer (AO), therefore, issued notice dated 30.03.2019 under section 148 of the Act to the assessee, in response to which, the assessee filed his reply on 02.05.2019, stating therein that the return originally filed on 27.09.2012 may be treated as return filed in response to notice under section 148 of the Act. The AO, thereafter, issued statutory notice under section 143(2) of the Act dated 25.09.2019, requiring the assessee to submit the requisite information/details/documents with regard to the above transaction. In compliance to the statutory notices, the assessee filed various details on the e-portal of the Department and also informed the AO that the transaction pertained to preceding assessment year. The AO, after considering the reply and details furnished by the assessee, was of the view that the assessee had received a sum of Rs.26,95,654/- as profit on sale of shares of ‘Coronet Industries Ltd.’ As per the AO, Coronet Industries Ltd. was found to be a penny stock firm and, therefore, the Long Term Capital Gain of Rs.26,95,654/- claimed by the assessee was nothing, but an arrangement by the assessee to introduce unaccounted money in his books through accommodation entries. The AO did not accept the claim of the assessee for exemption under section 10(38) of the Act and treated the same as assessee’s own money introduced by him through various ITA No.579/LKW/2024 Page 3 of 10 channels. The AO was of the opinion that while arranging the alleged accommodation entries, assessee might have paid commission @ 2.5%, which came to Rs.67,391/-. He, accordingly, added the amount of alleged commission of Rs.67,391/- to the amount of Rs.26,95,654/-, which came to Rs.27,63,045/- and added the same to the income of the assessee. The AO completed the assessment under section 147 read with 143(3) of the Act, assessing the total income of the assessee at Rs.48,16,670/-. 2.1 The AO also invoked the provisions of section 115BBE of the Act and initiated penalty proceedings under section 271(1)(c) of the Act, separately. 2.2 Aggrieved, the Assessee preferred an appeal before the Ld. First Appellate Authority challenging the initiation of re- assessment proceedings as well as on merits. Subsequently, the appeal of the assessee was migrated to NFAC, who dismissed the appeal of the assessee by upholding the reassessment proceedings as well as dismissing the grounds on merits. 2.3 Now, the assessee has approached this Tribunal challenging the dismissal of his appeal by the NFAC by raising the following grounds of appeal: ITA No.579/LKW/2024 Page 4 of 10 1. Because there being no material to form reasons to believe as mandated in section 147, the notice issued u/s.148 and the reassessment framed thereafter is all without jurisdiction, the order passed u/s 147/143(3) as upheld by the CIT(A) be quashed. 2. Because there being no income accrued during the year under consideration, and the entire capital gains having been accrued in A.Y. 2011-12 consequently there being no escapement of income, moreover, there being no income generated from capital gains during this year, the entire proceedings initiated u/s.147/148 as upheld by the CIT(A) be quashed. 3. Because there being no reason to believe that income has escaped assessment and the material relied upon having no bearing with the facts of the assessee's case, the notice issued u/s.148 and the proceedings initiated and upheld by the CIT(A) all without jurisdiction be quashed. 4. Because the AO as well as CIT(A) has releied upon the report of the DDI, Inv. Kolkata, relying on the statement of Ashok Kumar Kayan, which report of the DDI has not been provided, nor the statement has been provided, nor the assessee has been given an opportunity to cross examine the person whose statement has been recorded, the entire premise on which the reassessment proceedings have been initiated are devoid of substance be quashed. 5. Because in any case and all circumstances the amount of Rs.27,63,045/- received against debit balance due is not ITA No.579/LKW/2024 Page 5 of 10 income for the year under consideration, the addition upheld by the CIT(A) is bad in law be deleted. 3.0 The Ld. Authorized Representative for the assessee (Ld. A.R.) submitted that the impugned amount of Rs.27,63,045/- was received against debit balance due on 31.03.2011. It was submitted that the assessee did not purchase or sell the impugned shares during the year under consideration. It was submitted that the assessee had sold the shares in the earlier assessment year, i.e., in assessment year 2011-12 and that an amount of Rs.26,95,654/- was to be received against such sale proceeds of the shares in assessment year 2011-12 and accordingly the resultant Long Term Capital Gain was the income of the preceding assessment year, as no transfer had taken place during the year under consideration. To demonstrate this, the Ld. A.R. drew my attention to pages 26 to 28 of the paper book and submitted that these pages contained copies of ITR as well as computation of income for assessment year 2011-12 and it was pointed out that in the computation, the sale of shares had been duly disclosed, wherein, the amount received against sale of shares was shown at Rs.53,89,568/- and the amount was claimed as exempt under section 10(38) of the Act. It was further submitted that this fact was duly brought to the notice of the AO ITA No.579/LKW/2024 Page 6 of 10 during the course of assessment proceedings as well as before the Ld. First Appellate Authority. In this regard, my attention was also invited to pages 13 and 14 of the paper book, which contains the copy of reply furnished before the AO, stating that the impugned transaction had taken place in financial year 2010-11 relevant to the assessment year 2011-12 and not in the captioned assessment year. The Ld. A.R. also drew my attention to pages 15 to 18 of the paper book which contained copies of Contract Notes of the impugned transactions and it was pointed out that four Contract Notes specified settlement dates of February, 2011 and March, 2011. 3.1 The Ld. A.R. also drew my attention to paragraph 10.1 of the impugned order and submitted that the ld. CIT(A) himself has mentioned that the contention of the assessee regarding transaction pertaining to assessment year 2011-12 may be considered, but the issue was not related to Long Term Capital Gain earned and not offered to taxation but related to availing of accommodation entry by rooting unaccounted money by giving it the colour of sale of shares and subsequently claiming exemption under section 10(38) of the Act against Long Term Capital Gain. The Ld. A.R. submitted that, thus, the ld. CIT(A) himself had accepted the contention of the assessee that the transactions pertained to earlier assessment year, but all the same, had ITA No.579/LKW/2024 Page 7 of 10 chosen to ignore the same and had upheld the addition made by the AO. It was prayed that the impugned addition may be directed to be deleted. 4.0 Per contra, the Ld. Sr. D.R. placed reliance on the orders of the AO as well as the ld. CIT(A) and submitted that the ld. CIT(A) had very aptly adjudicated the issue by holding that although the impugned transaction might have pertained to the immediately preceding assessment year, but the fact remained that the proceeds of the impugned transactions were received during the captioned assessment year and that the issue involved was not about bogus Capital Gains being claimed as exempt under section 10(38) of the Act, but rather the conduct of the assessee in availing accommodation entries. The Ld. Sr. D.R. submitted that at the best, the file may be restored to the file of the AO for the purposes of verification by him. 5.0 I have heard the rival submissions and have also perused the material on record. It is seen that in this case, proceedings under section 147 of the Act were initiated on the basis of information available with the Department that during the year under consideration, the assessee was in receipt of accommodation entry to the tune of Rs.26,95,654/- from M/s Jai Maa Kali Enterprises by making transactions in lieu of sale of ITA No.579/LKW/2024 Page 8 of 10 shares of M/s Coronet Industries Ltd. which had been identified as being penny stock used for claiming bogus Capital Gains. The contention of the assessee was that the impugned amount credited in the Bank Account was only the receipt of amount due on sale of shares sold in the previous assessment year but received during the year under consideration. The assessee duly demonstrated this before the AO as well as the ld. CIT(A) by filing copies of ITR, Computation Sheet as well as Contract Notes which evidenced that the impugned transaction had been indeed taken place in the immediately preceding assessment year, i.e., assessment year 2011-12. However, both the lower authorities chose to disregard the submissions made by the assessee in this regard. 5.1 I have also gone through various documents filed before me and which are part of case record and I find that insofar as the assessee’s contention that the transaction of sale took place in assessment year 2011-12, is concerned, the same is correct. From these documents, it is evidently clear that the impugned transaction of sale of shares pertained to assessment year 2011- 12 only and not to the captioned assessment year and, therefore, the impugned receipts could not have been brought to tax in the year under consideration. It is also to be noted that even if the Department was acting on the basis of information received from ITA No.579/LKW/2024 Page 9 of 10 DDIT of Investigation Wing, the assessee was never confronted with any such report and neither was it revealed to the assessee whether or not his name appeared in that Investigation Report. The case records also show that the impugned sale of shares had been subject of enquiry in assessment year 2011-12 also and notice under section 148 of the Act was issued and subsequently responses were also requisitioned by issuing notice under section 133(6) of the Act and subsequently, reassessment proceedings were dropped. This initiation of reassessment proceedings in assessment year 2011-12 and its subsequent closure without any addition would also emphasize the fact that although the issue of Long Term Capital Gain in assessment year 2011-12 was enquired into, nothing illegal was found and the returned income was accepted and, therefore, there was no reason to reopen the case in the present assessment year for the same transaction. Once the Department had accepted the assessee’s contention regarding Long Term Capital Gain in assessment year 2011-12, the Department cannot bring to tax the realization against sale proceeds of the same transaction in another assessment year. Accordingly, I allow ground Nos. 4 and 5 of the assessee’s appeal and set aside the order of the ld. CIT(A) on this issue and direct deletion of the addition. ITA No.579/LKW/2024 Page 10 of 10 5.2 Since ground Nos. 1, 2 and 3, challenging the initiation of reassessment proceedings, were not argued before me and the same have also become academic in nature in view of assessee being allowed relief on merits, ground Nos. 1, 2 and 3 are dismissed as not having been pressed. 6.0 In the final result, the appeal of the assessee stands partly allowed. Order pronounced in the open Court on 03/07/2025. Sd/- [SUDHANSHU SRIVASTAVA] JUDICIAL MEMBER DATED:03/07/2025 JJ: Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. DR By order Assistant Registrar "